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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 14704 / October 31, 1995
Securities and Exchange Commission v. Anthony Sarivola, et al.
(U.S.D.C. - S.D.N.Y.) 95 Civ. 9270 (LMM)
The Securities and Exchange Commission ("Commission")
announced the filing of a Complaint in the United States District
Court for the Southern District of New York against Anthony
Sarivola, Donna Sarivola, Alan Cohen, Joseph J. Mazzo, George C.
Bergleitner, Jr., Richard Voight, Edward F. Duffy, Michael N.
Karp, Mark Anthony, Michelle P. Suppes, Milan International,
Ltd., Milan National Corporation, Leona Enterprises, Inc.,
Standard Investment Holdings, Inc., Eurobanc, Ltd., and Suppes
Securities, Inc. The Commission's Complaint charges the
defendants with fraud and, variously, with violations of the
registration, corporate reporting, and books and records
provisions of the federal securities laws.
The Commission's Complaint alleges, among other things,
that:
Beginning in or about October 1991 and continuing until at
least July 1992, Sarivola masterminded a scheme to inflate
artificially the reported assets of Leona and the other corporate
defendants which were secretly under his control (collectively
"the Sarivola Companies") by more than $60 million dollars. The
scheme enabled Sarivola, Donna Sarivola, Cohen, Mark Anthony,
Suppes and Suppes Securities to profit from the unlawful offer
and sale of securities of the Sarivola Companies.
Sarivola concealed his control of the companies in order to
avoid disclosing his prior record of securities violations and
criminal fraud charges. Sarivola also conducted the scheme, in
part, for 4 months while incarcerated for an unrelated mail fraud
conviction at Allenwood Federal Prison. Among other things,
Sarivola made numerous telephone calls from Allenwood in
furtherance of the scheme, and defrauded another inmate of at
least $170,000 by selling him Leona securities at inflated
prices.
Sarivola acquired control of Leona from Bergleitner in or
about October 1991. Bergleitner was the undisclosed promoter of
Leona and several other companies during 1989-1990. Between
January 1989 and September 1990, Bergleitner caused each of these
companies to file a registration statement on Form S-18 with the
Commission for the issuance of stock and warrants through a
"blank check" or "blind pool" offering. These registration
statements failed to disclose, among other things, Bergleitner's
role as a promoter, his compensation, and previous Commission
injunctions against him.
After Sarivola acquired Leona from Bergleitner, Sarivola
concealed his own control of Leona from the public and, together
with officers and directors of the Sarivola Companies, including
Donna Sarivola, Mazzo, Voight, Cohen, Duffy, and Karp, began
disseminating fraudulent information to the public stating, among
other things, that the Sarivola Companies controlled assets worth
tens of millions of dollars. In fact, the Sarivola Companies
were essentially shell corporations; at no time did the Sarivola
Companies have assets greater than $400,000, many of which
comprised the proceeds from illegal trades. In furtherance of
the scheme, Sarivola and Donna Sarivola falsified books and
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records of the Sarivola Companies and provided fraudulent
documents to the independent auditor of Leona and Milan
International.
Sarivola designed the scheme to generate demand for Leona's
stock so that he and certain of the defendants could then profit
from selling the stock at vastly inflated prices. As a result of
the fraudulent conduct described above, Sarivola and Milan
International realized in excess of $1 million from, among other
things, the sale of unregistered securities of Leona purportedly
pursuant to the provisions of Regulation S, and the offer and
sale of unregistered Standard securities. Sarivola and Cohen
also caused losses to a broker-dealer of approximately $350,000
as a result of "free ride" purchases of Leona stock.
Two registered representatives, Suppes and Anthony,
facilitated the scheme by promoting Leona securities and
disseminating the false financial information to the public in
exchange for undisclosed compensation, or "kickbacks." In
addition, Suppes and Anthony executed Sarivola's illegal sales of
unregistered Leona securities through their firm Suppes
Securities, which Suppes exclusively controlled.
The Complaint seeks permanent injunctions against each of
the defendants variously for violations of Sections 5 and 17(a)
of the Securities Act of 1933 ("Securities Act"), Sections 10(b),
13(b)(2), 13(d), 15(c)(1) and 15(d) of the Securities Exchange
Act of 1934 ("Exchange Act") and Rules 10b-3, 10b-5, 12b-20,
13b2-1, 13b2-2, 13d-1, 15c1-2, 15d-1 and 15d-11. The Complaint
also seeks an order requiring Sarivola, Donna Sarivola, Suppes,
Mark Anthony, Bergleitner, and Suppes Securities to disgorge
their ill-gotten gains plus prejudgment interest thereon; an
order barring Sarivola, Donna Sarivola, Cohen, Mazzo and
Bergleitner from serving as officers or directors of a public
company pursuant to Section 20(e) of the Securities Act, and
Section 21(d)(2) of the Exchange Act; civil penalties against
Sarivola, Donna Sarivola, Mazzo, Cohen, Suppes, Anthony, Voight,
Duffy, Karp, Leona, Eurobanc, Milan International, Milan
National, Standard and Suppes Securities, pursuant to Section
20(d) of the Securities Act and Section 21(d)(3) of the Exchange
Act.
Simultaneous with the filing of the Complaint, Cohen, who
served as Director of Shareholder Relations, and Duffy and Karp,
who had served as directors of and counsel to certain of the
corporate defendants, without admitting or denying the
allegations in the Complaint, consented to the entry of final
orders permanently enjoining them from further violating the
antifraud provisions of the federal securities laws. In
addition, Duffy agreed to pay a $10,000 civil penalty and Karp
agreed to pay a $5,000 civil penalty. Duffy and Karp, practicing
lawyers, also consented to the entry of orders in related
administrative proceedings arising out of the conduct described
above, barring them from appearing or practicing before the
Commission pursuant to the Commission's Rules of Practice.